linked in facebook twitter rss

  • Interbrand
  • Brandchannel

your chance!
your chance!
     
  Vincent Grimaldi Can Automakers Make Us Dream Again?
by Vincent Grimaldi de Puget
June 6, 2005

If you ever thought that marketing, finance and engineering were as incompatible as oil and water, think again. The search for competitiveness is forcing us to push marketing fundamentals in every corner of an organization and across its value chain. Those who can't adjust face a sad reality.

The US car industry is a case in point. Here is an example that is going to make financiers and marketers alike shake their head in disbelief. In May, the big news on the financial markets was the downgrade of GM and Ford corporate bonds to "junk"status. Both the magnitude—they have combined borrowings of US$ 453 billion—and the timing of the news are noteworthy, since GM still had one of the top investment grades four years ago and the world economy has been doing moderately well. In sum, this news is only the result of growing pressures that built up over two to three decades.

Forty years ago, GM, Ford and Chrysler were manufacturing nine out of ten cars (including light trucks) sold in the US. GM and Ford combined market share has now fallen to about 42 percent, with no end in sight. Although Chrysler has also been through its ups and downs, its market share has recently been on an upswing, at 13.7 percent.

 
 

Simply put, financial analysts are concerned that Detroit has lost its magic touch, leaving the door open for its competition. Toyota, for example, increased its market share from 11.7 to 14 percent in the last year. Every car group—from BMW to Porsche to Nissan—has now invaded the SUV segment, eroding the fat profits of the late 1990s. If light trucks are still profitable, financial results are dragged down by the car segments, under intense competitive pressure in the largest world markets.

It would be simplistic to throw the blame at marketing and sales departments. GM and Ford manage some of the most valuable brands in the world, according to Interbrand and BusinessWeek's annual ranking of best global brands by value. They are also among the top 10 global advertisers, together with Toyota and DaimlerChrysler. The automotive industry is actually the biggest advertiser in the world, with about $20 billion dollars in worldwide media buying.

"Young grads dream of Silicon Valley rather than Detroit"

To understand the reality behind the figures, consider the following two facts that should make any Detroit engineers the happiest recruiters on college campuses: (1) With its 11,000 lakes and long Indian Summer, Michigan is one of the most beautiful regions in North America; (2) Designing a car is much more fun than writing code. Despite the selling point of American car manufacturers, young grads at MIT—a top engineering school—dream of Silicon Valley rather than Detroit, Michigan! Thus, GM and Ford not only compete with Toyota and Renault, but also with Google and Pixar.

It is a fundamental business strategy issue that goes way beyond the boundaries of traditional marketing and sales departments. Detroit appears to have grown out of phase with the global world it contributed to shape. It has been slow to adjust to the deep post-WWII changes caused by the convergence of free trade agreements and information age: capacity excesses, quality differentials, customer service issues, time to market, price discounts, and talent recruiting and retaining. Most of those elements are or should be marketing driven, in a holistic way. Unfortunately, it is a Detroit executive who was quoted as saying "marketing is not a priority for us."

Pointing to the legacy of the past does not provide a satisfactory answer to the competitive lack of the American industry. Many Detroit executives claim that the heavy costs of healthcare and pension plans give them a competitive disadvantage. Those issues—essentially valid—certainly need to be addressed nationwide. However, it should be noted that car manufacturers in Germany, France, the Benelux countries and Japan have also to deal with high labor costs and arcane labor laws. Deep structural changes are happening or will eventually happen in those countries as well.

Not missing the forest for the tree, the fact remains that customers increasingly choose brands traditionally considered as "imports." With the exception of too few hot products, Detroit's sales managers end up "pushing the metal" with deep discounts to consumers and large fleet sales. Both erode profits and brand equity.

It is hard to accept that Detroit could prefer pushing rather than selling its vehicles. People have a truly emotional relationship with their car. They clean it, brush it, groom it and even give it a room in their house. Many if not most marketers would rather sell cars than soap.

In the grand realm of global economics, Detroit was dealt a terrific hand. Despite the hammering, Southern Michigan is still (perhaps today more than ever) the automotive capital of the world. The credit downgrades are disconcerting but the prospect of a lasting turnaround is good. There is however a condition: Marketing emphasis must penetrate every organization, throughout the whole value chain. It is as central as “quality” was in the 1980s and must drive the entire management system with consistency. Cost cutting can only go so far, whereas making us dream shows no limits to driving an organization up.

 
   
   Vincent Grimaldi de Puget is a leading brand strategist. He is a partner at GRIFIN PARTNERS, focusing on capital investing and business restructuring, and a visiting professor at US and European business schools.



 
 commenting closed Add Social Bookmark bookmark  print
 suggest topic  recommend ( 5 )  email

  brandchannel brandspeak archive   2014  |  2013  |  2012  |  2011  |  2010  |  2009  |  2008  |  2007  |  2006  | 2005  |  2004  |  2003  |  2002  |  2001
 
 
Dec 19, 2005 Feeding the brand: New adventures in podcasts, RSS, ring tones and digital radio -- Nick Wreden
  Podcasts, RSS, ring tones and digital radio offer endless ops to communicate the brand in the 21st century.
   
 
Dec 5, 2005 Can Americans Do It Better? -- Vincent Grimaldi de Puget
  Why is it so hard for the Detroit manufacturers to get it right? A little bit of brand management could drive GM a long way down the road of solvency.
   
 
Nov 21, 2005 Capturing young minds with compelling content -- Nic Jones
  Developing an active relationship with your young market means creating engaging content.
   
 
Nov 7, 2005 Does your brand have hand? -- Karl Treacher
  The quickest way to lose loyalty? Offer to do whatever it takes to please the customer.
   
 
Oct 24, 2005 Tragedy Has a Language All Its Own -- William Lozito
  Words can be as powerful as a natural disaster, or would that be tragedy? A look at the descriptive power of words.
   
 
Oct 10, 2005 Choosing a Powerful Brand Name -- Tom Blackett
  In the top 100 global brands, family names are the most prominent. What can we learn about naming from looking at the top 100 brands in the world?
   
 
Sep 26, 2005 Protecting Your Trademark Far from Home -- Cassiano Golos Teixeira
  Managing a mark across global markets can be tricky and costly.
   
 
Sep 12, 2005 Hip-Hop Culture Crosses into Brand Strategy -- Joseph Anthony
  Big corporations cross over to cash in on the hip-hop craze sweeping the US.
   
 
Aug 29, 2005 Nurturing a brand strategy in retail operations -- Linda Anderson
  How can a brand help nursery and garden retailers reap rewards?
   
 
Aug 15, 2005 Goodwill Hunting: Financial Value of Marketing & PR -- Doug Albertson
  The value of goodwill in gaining return on your marketing investment.
   
 
Aug 1, 2005 Marketing Metrics and Package Design -- Ted Mininni
  How can a good package help deliver return on investment?
   
 
Jul 18, 2005 China shops for new US export: global brands -- Carl D. Howe
  Lenovo buys IBM's PC business, Haier bids on Maytag and CNOOC bids for Unocal. China is on a shopping spree for US brands.
   
 
Jul 4, 2005 The Value of Technology in Managing Brands -- Kent St.Vrain
  Can the technology platforms used by finance and operations help marketers too?
   
 
Jun 20, 2005 Miss Silverbird International: Brand extension or brand arrogance? -- Uche Nworah
  Miss Silverbird International competes on the crowded stage of world beauty pageants.
   
 
May 23, 2005 Attracting Consumers through Package and Product Innovation -- Satkar Gidda
  Those that have the courage to innovate will sweep the board over the “me too” brands.
   
 
May 9, 2005 Overpowering the Brand Cynic -- Maureen P. Wall
  Overcoming the cynics among your ranks.
   
 
Apr 25, 2005 Can China’s heritage brands be saved? -- Doris Ho
  Can China’s heritage brands compete against tough international goods and services?
   
 
Apr 11, 2005 In Pursuit of Brand Loyalty -- Jean-Léon Bouchenoire
  Do customers lack loyalty or have brand owners betrayed their brand promise? Demonstrated by examples from the car industry and fashion houses.
   
 
Mar 28, 2005 Are You Brand Worthy? -- Kim Castle
  How strong is your commitment to brand? Four questions to find out if your business is in fact brand worthy.
   
 
Mar 14, 2005 Open Source Branding: Invite customers in -- James Campbell
  Brands should drop the subtle psychological bullying and try genuinely interacting with their audience.
   
 
Feb 28, 2005 A human operating system for your brand -- Jean-Claude Saade
  Customer relationship management: In defense of an honest relationship with consumers.
   
 
Feb 14, 2005 Beyond Royalty Revenue: Measuring ROI from licensing -- Stephen R. Reily
  In an era where accountability for marketing resources is at an all time high, how should we measure the full range of benefits from licensing.
   
 
Jan 31, 2005 If marketing is not important to you, what is? -- Vincent Grimaldi de Puget
  A combination of strategic and organizational approaches to marketing is central to competitiveness and survival.
   
 
Jan 17, 2005 Kids’ Brands: Staple, fad, craze or classic? -- Nic Jones
  An appeal for categorizing kids’ products by distinctions between fads and classics.
   
 
Jan 3, 2005 Would you buy polluted water? Reflections on brands and sustainable development -- Vincent Grimaldi de Puget
  Is sustainable development good business sense? From junk food to environmental ruin, many brands are laughing in the decline of our planet and mankind.